U.S. Steel (X - Get Report) stock was one of the few bright spots in the stock market Tuesday, closing higher by 3.4% at $11.93. This is after falling more than 5% and breaking below $10.75 in premarket trading.

The move comes after the company announced it had agreed to terms to buy a minority stake in Big River Steel. U.S. Steel will buy a 49.9% stake for $700 million, but the deal could ultimately be worth $2 billion should U.S. steel exercise its option for the remaining 51.1% stake by 2023.

Industry-wide consolidation continues and investors are viewing this move as a favorable one for U.S. Steel.

However, the stock price will need to do much more than a one-day rally to convince traders that it's done going down. Despite the promising price action on Tuesday, U.S. Steel stock isn't all that far from hitting new multi-year lows.

Let's take a look.

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Trading U.S. Steel Stock

Daily chart of U.S. Steel stock.
Daily chart of U.S. Steel stock.

On the daily chart above, spotting the downtrend (blue line) is not difficult. In fact, readers don't even need a line to emphasize how terrible this stock has been, as it continues to make a series of lower highs.

However, we have an interesting inflection point showing up, with shares just over $12 at the moment.

X stock briefly penetrated its 50-day moving average before downtrend resistance rejected the stock and pushed it lower. If U.S. Steel stock can reclaim downtrend resistance and the 50-day moving average, it could trigger a rally higher.

It helps that more than 28% of the float is currently sold short. If bears get a whiff that U.S. Steel stock may be breaking out, they'll want to get out of the way before it's too late. The way they do that? Buy stock to cover their position. This action can add fuel to the fire, as shorts get squeezed out of their position.

That's not necessarily going to happen, but it is one possibility should X stock clear downtrend resistance. In that case, the 23.6% retracement at $14.60 can be used as the first upside target, with the 200-day moving average above that.

If downtrend resistance continues to press X stock lower -- which is the look of a descending triangle, a bearish technical development -- then investors need to watch $10.16. This is where X stock put in a double bottom in August and September.

A break below that will usher in new lows and could trigger even more selling pressure.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.